Markets in consolidation, but with an upward bias
Indian equities may not have delivered blockbuster returns this year, but HDFC AMC MD & CEO Navneet Munot believes the phase of consolidation is both healthy and necessary.
“The Nifty is up about 8%, midcaps around 3%, and smallcaps are slightly negative. The froth in pockets of the market has been cleaned up,” Munot told ET Now in the Samvat 2082 Investment Gurus series.
He added that policy reforms and strong domestic inflows will continue to lend stability, even as global uncertainties and stretched valuations may cap short-term upside.
“We remain in consolidation, but with an upward bias,” Munot said.
SIP investors: The true heroes of India’s market story
If there’s one group that has changed the character of Indian markets, Munot says it’s the SIP investor.
“Since 2021, domestic investors have invested over $240 billion, while FIIs have sold $25 billion. SIP investors have provided the resilience that kept our markets steady,” he noted.Today, India boasts 10 crore SIP accounts, with average monthly inflows of ₹29,200 crore and an average ticket size of ₹2,900.“It’s not just about money — it’s about conviction, patience, and gratitude. These investors are coming in for the long haul,” Munot said.
He also acknowledged that only 5.5 crore Indians are unique investors, highlighting the “huge responsibility and opportunity” for mutual funds to reach new households.
Investor behaviour has evolved
Gone are the days of speculative investing, Munot believes.
“Earlier, investors would ask — ‘Should I invest now or wait?’ Now, they’re disciplined,” he said. “My driver doesn’t ask for stock tips anymore; he has a SIP.”
This behavioural shift, according to him, is the foundation of India’s long-term investment success. “Being disciplined matters more than being smarter than the rest,” Munot said.
AI Boom: Overhyped and underhyped
Commenting on global trends, Munot said the AI boom resembles the dot-com era — both full of promise and speculative excess.
“AI is overhyped in terms of current valuations, but underhyped in terms of long-term impact on productivity,” he explained. “Some companies will create immense value, others will fade away — much like what we saw in the 1990s.”
He added that India’s role in this global transition will likely be as the ‘use capital’ of the world.
“We leveraged the internet and digital infrastructure brilliantly; AI could be our next transformation story.”
India could be a safe haven amid global volatility
Munot believes India could emerge as a relative outperformer even if global markets correct sharply due to the AI bubble or other macro shocks.
“Historically, India has followed the global boom-bust cycle. This time could be different,” he said.
He pointed to strong domestic consumption, government-led capex, and rising FDI inflows — including recent large investments from Japan, the Middle East, and Google — as evidence that India’s structural story remains intact.
Earnings to reaccelerate in FY26
After a year of consolidation, Munot expects earnings growth to return to double digits, in line with nominal GDP growth.
“With inflation normalizing and policy reflation underway, nominal GDP could reach double digits. Earnings will follow that trajectory,” he predicted.
Diversification still key: ‘Don’t choose between debt and equity’
Munot emphasized that asset allocation, not asset selection, is the foundation of sound investing.
“You don’t need to switch between asset classes. A balanced portfolio across equity, debt, and gold is the best way to manage risk,” he said.
He added that different asset classes perform at different times, and investors must resist the urge to chase short-term winners.
Active vs passive: India will remain a stock pickers’ market
Despite the rise of index investing, Munot remains confident in the future of active fund management.
“India is still a stock pickers’ paradise,” he said. “Active and passive will both grow, but those who invest in research and long-term conviction will continue to generate alpha.”
He drew a parallel with the U.S. in the 1980s, saying, “Just like America’s financial market maturity phase, India’s asset management industry will expand across active, passive, private equity, and real assets.”
India’s capital market story is just beginning
Ending on an optimistic note, Munot said India’s journey from a nation of savers to a nation of investors is creating a more inclusive growth story.
“Save, invest, prosper — that’s the mantra for Samvat 2082 and beyond,” he said.